[cid:image001.png@01CF86DF.54E9EF40] Friday, 13 June 2014 [cid:image006.jpg@01CF86DF.5D106BE0]
Snapshot � Company news highlights: Petra Diamonds recovers 122.52 carat blue stone, Kirkland Lake places C$7m in bought deal, Bumi avoids default, New Crest guides toward 2.2-2.4moz Au, Aspire acquires Mongolian coking coal in JV with Noble, Perseus unlikely to meet guidance � Commodity review highlights: Chinese copper smelters agree TC/RCs down slightly, Chinese crude steel output hits record, European coal prices continued pressure, Chinese Rebar up � Other economic news: Freeport and Newmont CEOs in Jakarta for tax talks � African resources update: Possible PGM strike resolution, South African credit rating downgraded by Fitch, South African economy suffers from energy supplies, todays African Proverb � Market notes: Happy Friday the 13th! Asia Pac has opened weaker after US & European markets fell on concerns over the escalating violence in Iraq and the weaker US retail sales and jobs data.

Mining names in Australia continue weak performance as iron ore and copper fell again overnight.

Gold names are strong after spot found support on the weaker US session and on concerns over oil prices and regional stability in the Middle East.

In China, signs of a pickup in the economy were evident with IP up 8.8% YoY (in line with expectations) and retail sales rising 12.5% YoY (better than consensus at 12.1%). Commodities: Iron ore fell to US$91.50/t yesterday while local Chinese brokers cite inventory liquidations as a consequence of the unfolding commodity financing probe at Qingdao port.

Copper fell hard, down over 2% to US$6,620/t, on concern that its use as collateral will slow after the State Reserve Bureau became the latest institution to review its current financing arrangements.

Elsewhere, palladium and platinum futures fell after the SA mining companies and AMCU union reached an "in-principle undertaking". Data Due: UK: Construction Output Apr (1.5% MoM and 2.9% YoY fcst), Germany - CPI May (-0.1% MoM and 0.9% YoY unch fcst), France - Non Farm Payrolls 1Q14 (-0.1% unch fcst); Spain - CPI May (0.0% MoM and 0.2% YoY fcst); Eurozone - Trade Balance Apr (EUR16.3bn fcst, EUR17.1bn prev), Employment 1Q14 (no fcst, 0.1% MoM and -0.5% YoY prev), US: PPI May Final Demand (0.1% MoM fcst, 0.6% prev); University of Michigan Confidence June (83.0 fcst, 81.9 prev)
Company news � Petra Diamonds (PDL LN) recovery of 122.52carat blue diamond at Cullinan.

Further analysis is required in order to assess its potential value that means the diamond will not be sold this financial year ending June.

Source: Company Investec View: This is a great result for the company, the last special stone recovered was a 29.6 carat exceptional blue stone sold for US$26m or US$863k/carat.

Looking at the pictures the latest stone doesnt appear to be as vivid so we cannot be sure that it can attain the same value per carat, but even if its a quarter of the value per carat it could still be worth around US$26m or around 5cps, or around 3cps post tax in our view. � Kirkland Lake (KGI LN) places C$7m in bought deal.

The company has announced that it has entered into an agreement whereby it will issue 1.795m flow-through common shares at a price of $3.90/share for total proceeds of c.C$7m, with the option for another C$0.5m worth.

The company intends using the proceeds to advance its surface exploration program.

Source: Company Investec view: The near surface (0-c.300m) exploration program has been delivering promising results but KGIs cash flow constraints have limited the pace at which it could advance this.

The raising now provides it with the backing for additional infill and exploration drilling.

The bought deal also demonstrates that there still remains an appetite for junior gold companies.

The KGI CN price is up 39% in the past week. � Bumi Resources (BUMI IJ) avoids default, for now.

The company recently narrowly avoided a default, after paying the overdue coupon on its US$300m Nov 2016 bonds.

The shares resumed trading yesterday after being suspended by the local exchange.

Source: Bloomberg Investec view: Like all thermal coal players, the company is under pressure from the depressed commodity price but in Bumis case this is exacerbated by onerous debt levels, with seemingly high refining risks. � Newcrest (NCM AU) provides FY15 guidance for 2.2-2.4moz gold, 75-85kt copper.

Gold miner Newcrest provided guidance that the company expects to be cashflow positive in FY15 based on gold production guidance of 2.2-2.4moz, copper production guidance of 75-85kt, all in sustaining costs guidance of A$2.3-2.6bn, capex of US$0.62-0.72bn, and exploration expenditure of A$60-70m.

Management also confirmed FY14 guidance for A$100m of free cashflow.

Source: Company Investec view: Gold production and costs would be approximately flat YoY in FY15 based on guidance. � Aspire (AKM AU) acquires Mongolian coking coal JV with Noble (NOBL SP) from Xanadu (XAM AU).

Mongolian coking coal explorer Aspire Mining has acquired Xanadu Mines 50% interest in the Ekhgoviin Chuluu JV with Noble Group, which owns 60% of the Nuurstei coking coal project, by agreeing to issue 10m shares, worth A$0.36m at the current share price, upon the JV agreeing to undertake project feasibility studies or MRAM granting the project a mining license plus an additional 5m shares in the event a 30mt resource is defined.

Source: Company Investec view: Nuurstei is located along the proposed rail line between Aspires Ovoot hard coking coal deposit and the Trans-Mongolia Railway so it makes sense for Aspire to endeavour to progress the project, which was bound to languish in Xanadus portfolio given XAMs focus on the Kharmagtai copper-gold project, to add increased scale to the proposed rail line as well as potential blending opportunities.

Nevertheless we are sceptical of Ovoot, despite its high quality coking coal, given its remote location means the company is very depending of finding an infrastructure solution.

Full project development costs for the 5mtpa project are estimated to be US$2.6bn to construct the mine and rail. � Perseus (PRU AU) unlikely to meet FY15 gold production guidance due to electricity grid problems.

Gold producer Perseus Mining has advised that the company will be challenged to meet FY14 production guidance following a transformer failure on the Ghanaian electricity grid that caused 73 hours of downtime and will require electricity usage reductions during peak electricity demand periods until the power correction circuit is replaced.

In addition, Perseus announced that it has received US$6.7m of VAT refunds from the Ghanaian government with further payments of US$9.1m scheduled prior to 8 July 2014 as partial settlements of the US$32.7m of VAT refunds owed to the company.

Source: Company
[cid:image007.png@01CF86DF.5D106BE0] Commodities news � Chinese copper smelters may have reached agreement on TC/RCs with BHP for 2H14 reflecting a cut of 3.5% to take charges down to US$95.5/t and 9.55c/lb.

Source: Thomson Reuters Investec View: This is a small change in charges and may signal slightly tighter availability of concentrates. � Chinese crude steel output hits record 70.43mt in May, up 2.6% yoy.

Total output for the first five months of the year reached 342.52mt up 2.7% yoy.

Source: Thomson Reuters � European coal prices remain under pressure off 50c/t to US$72.5/t yesterday as warm weather in Europe reduces demand for energy in the region.

Coal prices have been under pressure for month following oversupply and weak energy demand in Europe due to a mild winter and spring.

Source: Thomson Reuters � Rebar price: the only way is up? The steel reinforcement-bar for Oct.

delivery on Shanghai Futures Exchange gained as much as 0.7% to 3,048yuan/mt today, with commentary that the rebar inventory has fallen to such a low levels that further declines in prices may be limited.

The inventory in China stood at 6.63mt on June 6, the lowest since January.

The spot iron ore price meanwhile fell 2.1% yesterday, to $91.5/t.

Source: Bloomberg
Other economic news � Freeport and Newmont CEOs in Jakarta for tax talks.

Freeport McMoRan (FCX US) and Newmont Mining (NEM US) CEOs are both in Jakarta to resolve the mineral export tax dispute ahead of the new government forming.

The escalating export tax of between 25-60%, starting 2H16, which has seen copper concentrate shipments stopped since January, is under scrutiny with both companies arguing that they should be exempt from the tax.

It was reported late last month that the two companies would transfer $140m into an escrow account determined by the government, as part of their commitment to build in-country refining facilities and that Freeport was to team up with a state-controlled counterpart, Aneka Tambang, to build a $2.3 billion copper smelter in East Java.

Source: Reuter, Jakarta Globe
African resources update � News of possible resolution to PGM strike out yesterday with agreement in principal to be presented to AMCU leaders and voted on today.

There are mixed reports that the deal may be rejected or accepted, with head of AMCU this morning meeting reportedly saying that he will be meeting with leaders of Lonmin, Amplats and Implats today or over the weekend.

Source: Mining MX & Thomson Reuters Investec View: We note that as the news broke yesterday of a possible resolution both platinum and palladium prices dropped around US$50/oz and the ZAR firmed, there has since been some recovery of PGM prices this morning.

We urge caution on assuming that the latest offer will be accepted. � South African credit rating revised to negative by Fitch.

The credit rating outlook was revised to negative from stable because of a deterioration in the countrys growth prospects, with 2014 GDP growth forecasts reduced from 2.8% to 1.7% and 2015 from 3.5% to 3.0%.

The rating was maintained at BBB.

"Increased strike activity, high wage demands and electricity constraints represent negative supply side shocks," Fitch said.

Source: Bloomberg Investec view: It is sobering that the actions of 70,000 striking workers can have such a profound impact on the countrys economy. � South African economy was 13% smaller than it would have been if energy supply had been stable according to Free Market Foundation.

The energy crisis the country is facing is deemed as more serious than the strike action in the platinum sector.

Source: Engineering News � Gunfire broke out for a second day yesterday on the Rwanda/DRC border with troops gathering, although a cease fire has been reasserted now.

The DRC government attributes the latest violence to Rwandan forces seizing and killing a Congolese soldier.

Source: Thomson Reuters � Todays African Proverb: "The basket goes where it will be returned".

Source: BBC
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